5th December, 2016
Let’s face it, franchising your business seems to be the way to the big bucks. In Australia alone there are over 1,160 franchise systems.
But ask any successful franchisor and they will tell you there is a heck of a lot of work to do before you make any money. In the early stages, it’s worth considering whether it’s easier to grow your business by opening another site under your management rather than bringing in outside people (franchisees) to fund your growth.
So before you set off down the track to franchise your business, be sure that franchising is the right growth mechanism for you and your business.
To successfully franchise your business, you need to at least have these six things in place.
Systems is what a franchisor sells. It is the proven process that encourages franchisees to buy into your business rather than set up one for themselves.
Every part of your business needs to be systemised. If that’s not the case, stop reading now and systemise every part of your business. From the production to suppliers, employment practices to workplace health and safety — there should even be a system for marketing and visual merchandising.
Franchisees need to follow systems to make sure your business runs the same in every location.
This may sound simple, but does your business have a brand story that is recognisable and attracts your target customer? Is it something that people are drawn to? Does it incorporate your values and provide a unique customer experience? In the long run it’s the brand that a franchisee will buy into.
Franchisees want to be part of something bigger; they want to belong to a brand. Your brand will also have logos and potentially product names that will need to be trade marked to protect your intellectual property.
Every franchisor must have at least one company store under their control. This is where they can demonstrate their business model — how it operates, how it looks and most importantly how profitable it is.
This store is the flagship. New franchisees will receive training there, and demonstrates your system so that the potential franchisee can conduct extensive due diligence.
This is the team that helps you to develop and train your franchisees as you cannot be everywhere all the time.
For the first few franchisees you will be their first port of call, but once you have more than, say, five franchisees, you will need people who know your system inside out and how it works so that they can support your franchisees.
Happy franchisees are your best salespeople. They show others that the system works and how happy they are to be part of your system. Nothing stifles your growth more quickly than a disgruntled franchisee who stops every new franchisee during the due diligence process.
Franchising has to be conducted under the Franchise Code of Conduct governed by the Australian Competition and Consumer Commission (ACCC). There are rules and regulations that you must operate under.
At the very least you must have a disclosure document, an information statement and a franchise agreement that meets the code of conduct. Therefore, you must have a team of professionals around you who understand franchising and how it works to properly instruct you on how to set up your franchise.
Ask any franchisor and they will tell you that it is a lot of hard work to set up a franchise. Not only do you have to set up the above, but you also have to sell franchises and be the representative of your brand.
You need to be available for your franchisees and for your operational team. You need to have visible passion, which will encourage people to be part of your franchised business. You need to be on top of your game for a very long time before you can rest on your laurels.
And here is the clincher — in the beginning all the money you are making is being invested back into the growth of your business. So for all your hard work you may not see any real money until you have more than 20 franchised business units.